CANADA FX DEBT-C$ trims losses after unexpected job gains in March

Fri Apr 10, 2015 9:36am EDT
 
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* Canadian dollar at C$1.2606 or 79.33 U.S. cents
    * Bond prices higher across the maturity curve

    By Solarina Ho
    TORONTO, April 10 (Reuters) - The Canadian dollar pared
earlier session losses against the U.S. dollar on Friday after
domestic employment figures showed the economy unexpectedly
created jobs in March.
    Economists had expected the employment level to remain
unchanged in March, but data showed the addition of 28,700 jobs.
However, the gains came from 56,800 new part-time positions that
offset the loss of 28,200 full-time posts. Unemployment remained
steady at 6.8 percent. 
    Shortly ahead of the employment report, data showed Canadian
housing starts rose much more sharply than expected last month.
    "On the surface it's modestly positive, taken in combination
with a slightly better-than-expected housing start report," said
Doug Porter, chief economist at BMO Capital Markets. 
    "I'd said they're mildly supportive of the currency, but the
currency is swimming against the tide of a strong U.S. dollar."
    At 9:14 a.m. EDT (1314 GMT), the Canadian dollar,
which was outperforming most major currency counterparts, was
trading at C$1.2606 to the greenback, or 79.33 U.S. cents. This
was stronger than just before the report, but still weaker than
Thursday's Bank of Canada close at C$1.2592, or 79.42 U.S.
cents.
    Tempering the loonie's moves was a broadly stronger U.S.
dollar. The greenback touched a three-week high against a basket
of currencies, supported by diverging bond yields between the
United States and Europe. 
    The latest employment data reinforces the market's view that
another interest rate cut by the Bank of Canada is unnecessary
at this time. Markets are pricing in only a 15 percent chance of
another 25 basis point rate cut when the Bank of Canada makes
its latest policy decision next week. 
    "Do you need more insurance policy at this point in time?"
said Stefane Marion, chief economist at National Bank Financial.
"I don't think so."
    Canadian government bond prices were higher across the
maturity curve, with the two-year price up 0.5
Canadian cent to yield 0.509 percent and the benchmark 10-year
 rising 32 Canadian cents to yield 1.339 percent.
    The Canada-U.S. two-year bond spread was -3.5, while the
10-year spread was -59.1.

 (Reporting by Solarina Ho; Editing by Lisa Von Ahn)